Prospective-Payment System Faulted in Study of Medicare

September 27, 1985

Thousands of sick, elderly Americans have been discharged from hospitals too soon or given inadequate medical treatment because of a Medicare cost-cutting program, a congressional study said yesterday.

Senators vowed to correct and fine-tune the so-called Prospective Payment System, which began two years ago.

Sen. John Heinz (R-Pa.), chairman of the Senate Special Committee on Aging, said the study by the panel's staff indicates that "seriously ill Medicare patients are being denied admission to hospitals or catapulted out of hospital doors prematurely . . . . "

The study also said that many patients are not informed of their right to appeal hospital decisions and that "a number of other very serious quality of care issues are not being addressed at all."

Under the prospective payment system, established in October 1983 to cut costs in the $71 billion-a-year Medicare program, hospitals are paid a predetermined specific amount for the care of beneficiaries, depending on the diagnosis.

Previously, Medicare, the government's health-care program for the elderly, reimbursed hospitals after treatment based on reasonable charges. While the report said it was impossible to calculate precise figures on the extent of the problem, it is "more severe and widespread" than the Health and Human Services Department's preliminary estimates. The Health Care Financing Administration said between 2,500 and 3,700 patients have been prematurely or inappropriately discharged.

Dennis Siebert, a HCFA spokesman, said the agency is concerned about possible program abuses, but has not found any "systemwide evidence" of premature discharges. "We don't think it occurs in tremendous proportions," he said.

Nevertheless, the agency moved last June to improve the enforcement tools of the groups that it hires to monitor the program.